Prime Minister Perry Christie's Consolative News on The Budget Deficit

Prime Minister Christie's comforting words on the deficit: ...new revenue figures seem set to improve the fiscal outlook and GFS deficit for next year

Deficit Forecast Revised

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

21/06/2004

More than three weeks after his deficit projections in the budget communication sparked criticism in some quarters, Prime Minister Perry Christie has revised those numbers, providing a more positive forecast.

Mr. Christie told the Journal shortly after Members of Parliament passed the 2004/2005 budget late Friday night that new revenue figures seem set to improve the fiscal outlook and GFS deficit for next year.

The budget projects a GFS deficit of $164 million, but the prime minister said it is likely that the figure will be less.

He said the new expectation is that the deficit for 2004/2005 could be closer to 2.5 percent of GDP as opposed to the 2.9 percent he projected in the budget communication on May 26.

At the time, the prime minister said, "If the process of reviewing the national accounts data leads to substantial increases in the GDP data, the actual level of GSF deficit could be considerably lower."

While speaking to the Journal, he said his hopes have been realized.

"We were projecting an outturn for 2003/2004 of $920 million," Mr. Christie said.  "We have now been informed that the revenue of $920 million has already been registered and it is likely that we will record an amount nearer to $950 million.  We believe that this is indicative of the improved techniques and procedures in revenue collections."

The prime minister said it is important for him and his government to see this as an indicator because they have argued in the budget presentation that there will be 3 percent growth in the economy this year.

When added to improved revenue collections, this would allow the government to "attack" the GFS deficit, he said.

"What I think is to be learnt from this is that the efforts of the Ministry of Finance to introduce technology and expertise inclusive of equipment for the enhanced collection of revenue is serving to be to the advantage of the government," the prime minister said.

"We have truly predicated our budget on this basis: We believe that rather than pass additional taxes, which in part was recommended by the [International Monetary Fund], that we are able to, based on historical evidence, take advantage of the capital inflows as a result of the Kerzner development."

He told the Journal that the government has every reason to continue with its optimism.

Only days after he introduced his "no new taxes" budget, Prime Minister Christie faced opposition in and outside of parliament.

Although saying that he was not seeking to put himself at odds with Mr. Christie and his government, Central Bank Governor Julian Francis spoke of the need for Bahamians to pay more taxes to finance government services.

Mr. Francis also warned against continued borrowing to cover the deficit.

When asked to respond to the governor's suggestions, Mr. Christie said, "It shows that if he has done that, and he is able to do it independently of the process of governance of the country, that there is something that we should be doing to harmonize the efforts of those who advise me in the Ministry of Finance and those agencies that are a part of the financial governance of the country, like the Central Bank."

He added, "We ought to make every effort to ensure that we're working together."

Mr. Christie's revision to his deficit forecast came only a day after former Prime Minister Hubert Ingraham told parliament that the new budget does not provide the right tonic for the country's fiscal predicament.

"I assert that now is not the time for reliance to be placed upon unrealistic revenue increases from existing taxation," Mr. Ingraham said.

He also urged the prime minister to "rein your colleagues in."

"They are spending and committing to spending too much," Mr. Ingraham said.  "You have to tell them there are no available government jobs now; they will come when there is strong economic growth and larger investment inflows.  And tell them unless spending is restrained, there won't be any jobs for them."

But a confident prime minister said Friday that, "The growing strength of the economy in 2004 and 2005 will generate significant additional revenues."

The budget debate is scheduled to begin in the Senate today to give Senators enough time to pass the spending plan in time for the new fiscal year, which begins July 1.

The Bahamas Central Bank Governor, Julian Francis Contradicts Prime Minister Perry Christie on the Amount of the Nation's National Debt

The Central Bank Governor said that The Bahamas national debt is now around $2.4 billion, which is 42 percent of GDP.  But last week, the Prime Minister said the debt was just under 40 percent of GDP

The Governor of the Central Bank of The Bahamas Warns Also that The Bahamian Government Must Prevent A Fiscal Crisis Later - By The Containment  of The Country's National Debt Now

Bahamas Debt Warning Issued

By Candia Dames

Journal Staff Writer

candiadames@hotmail.com

Nassau, The Bahamas

06/07/04

Governor of the Central Bank Julian Francis on Sunday contradicted Prime Minister Perry Christie by revealing a level of debt that is higher than what the nation’s leader pointed to during the budget debate last week.

Mr. Francis also warned that the government must move now to contain the national debt to prevent a fiscal crisis in the future.

“We can’t continue to add to the national debt indefinitely,” said Mr. Francis, who was a guest on the Radio Love 97 Programme “Jones and Company”.

Mr. Francis said that the national debt is now around $2.4 billion, which is 42 percent of GDP.  But last week, the Prime Minister said the debt was just under 40 percent of GDP.

Countries that go beyond the 40 percent mark are considered to be entering the danger zone in terms of fiscal management.

Mr. Francis said, “So you can see, we’re already marginally above that number at 42 percent.  That doesn’t mean that all of a sudden we are bankrupt over night or anything like that, but it does mean that you don’t want to go much further than this.”

He pointed out that since 1984, the national debt has increased from 25 percent of GDP to the present figure of 42 percent.  This increase spanned three different administrations, he reminded.

“There is a tendency on the part of our country to accumulate debt in order to balance the budget of the government and what I am saying as the spokesperson for the Central Bank of The Bahamas is that this is getting to the point where we should not see this as a continuing option,” said the governor, who stressed that he was not attempting to create alarm over the situation.

He agreed with the Prime Minister that the national debt is less of a concern because most of the debt is domestic.

“I accept that idea,” Mr. Francis said.  “It would be of a much more important concern if it were substantially in foreign currency.”

With the budget debate ongoing, there has been much talk about the national debt and the projected deficit of $164 million.

“The fact that there is a deficit means that the government has to borrow to fund that deficit and any borrowings by the government have to be paid back at some point,” Mr. Francis said.

“What I am saying is that there is a point where we need as a people to recognize the fact that we’ve probably reached a level of borrowing that should not be too easily exceeded, except during very, very important emergencies,” he added.

While on the Sunday programme, Mr. Francis again highlighted the need for Bahamians to pay higher taxes.

It prompted the show’s host, Wendall Jones, to ask, “Do you think that it is proper for the Governor of the Central Bank to be making statements about the need to have an increase in taxes at a time when the Prime Minister and Minister of Finance has introduced a budget and has said that he is not going to increase taxes?  Isn’t that walking out of step with the Government of The Bahamas?”

Mr. Francis responded, “Well, no.  I don’t think so and I am sure that the government would agree with me on this.  The role of the Central Bank, which is an entirely professional institute, is to be a kind of monitor, in a way, almost a police on these kinds of issues.”

He added, “I have not sought and I don’t think that it is appropriate in fact to put myself at odds with the government on these kinds of issues, but it certainly does not prevent me – and I think that we have to be extremely careful about that.  If we get to the point where there can only be one view expressed, then I think it changes a bit the character of our country.”

Mr. Francis said his intension is not to criticize the government, but to sensitise Bahamians to the fact that there is no such thing as “a free lunch.”

“If we would like to have additional roads, hospital and schools,” he said, “we have got to be ready to pay for that.”

While expressing the need for a higher level of taxation, Mr. Francis also applauded the government’s efforts to improve its system of tax collection.

“You’ve got to collect what you can,” he said. “Don’t misunderstand me all.  I have absolutely nothing at all to say [against] the idea of being more effective in collecting taxes.  I think that is absolutely correct, but I don’t think that will cover the deficit.”

FNM 2007

FNM Launches “Restoration 2007”

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

Claiming that all the new jobs created since May 2002 were created by the Free National Movement, party leader Tommy Turnquest did what was expected last night – he slammed the performance of the Christie Administration, while again declaring it a “do nothing government.”

“The PLP is a government of show without substance,” said Mr. Turnquest, who brought the keynote address at a rally at the R. M. Bailey Park where he launched a campaign dubbed “Restoration 2007”.

“Let them know that thousands of Bahamians who get swing last time will pay the PLP back next election for their lies and empty promises,” he said.

The rally came one day after the Progressive Liberal Party Government observed its second anniversary in office, with Prime Minister Perry Christie declaring that he and his team remain on course.

Mr. Turnquest spent much of the time accusing the PLP of taking credit for the work he said was done by the Ingraham Administration.

Pointing to a number of resort developments on the Family Islands, including the much talked about Emerald Bay project in Exuma, Mr. Turnquest said the PLP “didn’t do anything to make any of that happen, just like they didn’t do anything to make Phase III of Atlantis happen.”

“All that was planned and approved by the FNM,” he said.  “The FNM built or caused all of them to be built.”

In recent weeks, the government has been boasting about its housing record, saying that the PLP built nearly 600 houses in two years, compared to the fewer than 800 houses built by the FNM in nearly 10 years.  But Mr. Turnquest sought to set the record straight.

“The PLP is building houses in existing subdivisions, many of which were planned and created by the FNM,” he said.  “They are building without building permits and are not providing parks, or open spaces or commercial areas like the FNM did.”

Free National Movement Chairman Carl Bethel, meanwhile, said the government fell far short of its projection for the rate of growth of the Bahamian economy last year.

“Despite the government’s promise of 2.5 percent economy growth for the last budget year, the latest figures from the IMF show that the Bahamian economy last year grew by 0.9 percent,” Mr. Bethel said.

During his budget communication last May, the prime minister actually said that the International Monetary Fund projected real economic growth of the Bahamian economy of 2.9 percent its April 2003 World Economic Report.

Mr. Bethel claimed last night that, “Last year, under the PLP The Bahamas had the worst economic performance of any comparable country in the Caribbean.”

He also claimed that the level of Net Foreign Investment in the Bahamian economy fell from $400 million left by the FNM in 2002, to only $200 million.

Mr. Bethel again attacked the quality of governance in the country, saying that under the PLP the country is beset by “bad government and laziness.”

“There is no money in the Treasury, and while the government is racking up a record-breaking budget deficit this year, the people who could have paid good money to ease that pressure have been giving a whopping tax cut,” he charged.

Mr. Bethel said certain real property exemptions granted under the PLP Administration will provide significant benefits for wealthy persons like those who live in the exclusive Lyford Cay community.

But on Sunday, while appearing as a guest on the Love 97 Programme “Jones and Company” Prime Minister Christie pointed to real property tax cuts as initiatives that have benefited Bahamians who need them most.

“We have given all first-home buyers exemptions from stamp duty on their homes up to $250,000,” Mr. Christie pointed out.  “We have eliminated real property tax for Bahamians up to $250,000…This has all proven already to have a direct positive impact.”

At the rally, Mr. Bethel also slammed the PLP on national security issues.

“The Police Force and the Defence Force are demoralized and unhappy,” he claimed.  “They are under-funded, under-equipped, under-staffed and under-paid.  The government does not seem to have any plan or strategic vision to develop and improve our armed and security services.”

He vowed that “when this one-term government is run out of office the FNM will aggressively grow the economy; attract real foreign investment, stimulate increased Bahamian investment and ownership in the economy, create jobs and empower Bahamians.”